Existing home sales dipped 1.5 percent in July 2018 versus a year ago to 5.34 million on a seasonally adjusted annualized basis (SAAR) according to National Association of Realtors® (NAR). Sales shrunk 0.7 percent sequentially from June (SAAR). On an unadjusted basis, housing sales in the first seven months of 2018 totaled 3.153 million, down 1.6 percent from a year ago. Sales for the month of July 2018 came in at 522,000 versus 513,000 a year ago, a 1.8 percent gain.

The July 2018 median price was $269,600, up 4.5 percent from a year ago, and the average price ($307,800) up 3.0 percent year-over-year. The median and average prices in June 2018 set all-time records, with the decline in July solely due to seasonality. Median price has now risen 77 consecutive months on a year-over-year basis.

The following graph shows the trend in housing sales based on a trailing 12-month basis (TTM), but with monthly median prices. Sales have wobbled in the past year, and showed a slight uptick for the 12-months ending July 2018.

Sales and median prices are shown on a monthly basis in the following two graphs. Sales have been up in three of the seven months this year and down in four. Median price, on the other hand, continued on an upward accent driven by minimal inventory of just 4.0 months (seasonally adjusted) with 6.0 months considered normal (contrasted to 3.9 months a year ago). The inventory of available listings for sale dipped slightly to 1.92 million – a 0.5 percent drop versus a year ago.

The trend and corresponding seasonality in average prices are shown in the next graph.

Other metrics and insights from the July 2018 NAR release included:

55 percent of the sales closed in July were on the market less than one month, with the typical property lasting just 27 days from listing to a having a signed purchase contract

Where the U.S. housing market goes will be a function of jobs, interest rates, prices, incomes and inventory. The number of sales typically peak in June (the past four years) or July and August.

I do now believe that 2018 housing sales will be less than a year ago, but still strong. People have to live someplace, and in the majority of markets buying makes more sense than renting.

No doubt rising interest rates, increased home prices and expanding apartment construction are having an impact on sales, though slight at this time. Price will come into play at some time as the average hourly income rate in the U.S. has increased just 2.7 percent in the past 12-months and 12.6 percent in the past five years while median price jumped 2.7 percent and 29.4 percent for the same time periods, respectively.

Again we go with the slowly leaking tire analogy: the housing sales tire is still drivable at high speeds, but the warning light is on. For now, however, housing demand remains fundamentally strong given the U.S. economy.